GoPro Looks Finished

Smartphones are probably the only products that majority of the customers replace regularly. The primary reason why smartphones are upgraded by customers almost every year is their increasing utility. However, when it comes to other tech devices, consumers do not replace them as often as smartphones.

Just because a product is great doesn’t mean customers will spend money every year to upgrade it. This is the reason why shares of GoPro (GPRO) have tanked over the last 18 months. GoPro’s shares soared when the company hit the market because the company was in its growth phase.

However, since GoPro’s cameras were a fad, the growth phase didn’t last long and sales started plummeting as the market saturated way earlier than many investors were expecting.

Since GoPro relied on a single product, the stock fell after the market saturated. Since then, GoPro has been looking for ways to diversify its revenue stream. The company ventured into the drone market, however it now looks like the company’s efforts will be in vain.

The Department of Transportation and Federal Aviation Administration recently declared a set of drone rules that will restrict the growth of the market considerably. According to these rules, the drone must always be in the pilot’s line of sight, and the pilot should also have a remote pilot certificate.

Drone’s total addressable market was estimated to be huge primarily because of its usefulness in the enterprise space. The rule that the pilot should always be in line of sight of the drone has all but rendered drones useless for businesses like Amazon.

Although customers can still use drones, the restrictions will also have implications on the addressable market size. Hence, it is highly likely that GoPro’s drone initiatives will not be able to turn the company around.

GoPro’s delay in launching the Karma drone doesn’t help it cause either as the competitors will take a lead in whatever is left of the consumer market.

Conclusion

GoPro’s camera fad has died and the arrival of the Hero 5 action camera will not change that. Drone was the company’s only hope for a turnaround, but the aforementioned rules have further dented the company’s hopes.

Despite GoPro’s drastic fall over the last few months, I don’t think the stock has bottomed yet. Due to the reasons mentioned above, I am certain that GoPro has more downside to offer, which is why I think the stock is a sell.